Cryptocurrencies wouldn’t function if people didn't have a way to transfer them. After all, one of the primary goals of Satoshi Nakamoto's Bitcoin whitepaper was to create a trustless peer-to-peer (P2P) payment network. However, since blockchains are decentralized, they can't rely on third-party financial institutions to validate transactions. Instead, crypto users have to use "wallet addresses" to send and receive virtual assets. These addresses help people send their crypto while preserving Web3's decentralization.
Whether using a centralized crypto exchange (CEX) or a self-custodial crypto wallet, you’ll encounter dozens of addresses associated with various crypto assets. Learn what a wallet address is to securely send digital tokens to your friends and family.
What is a wallet address?
Before explaining a wallet’s blockchain address, we need to review how a crypto wallet functions. Every wallet contains private keys, which grant you access to the coins stored in a wallet, and public keys, which help you securely receive funds from others. These keys use advanced cryptography to preserve your privacy. Only people who have access to the private keys can send and receive crypto in a wallet.
Wallet addresses are much like phone numbers or social media usernames. Wallets use the public keys to generate "wallet addresses" that anyone could use to send their crypto. Think of these addresses as similar to email addresses. When transferring digital assets, you can safely share these addresses with friends, family, and reputable crypto companies. In contrast, your private keys are like the password to your email.
At first glance, each cryptocurrency wallet address looks like a random string of letters and numbers. However, most blockchains have identifying "tags" at the start of these addresses to verify you're on the right network. For instance, all Ethereum addresses start with "0x," while most Bitcoin addresses start with "1," "3," or "bc1." As an example, Ethereum's Beacon Chain address looks like 0x00000000219ab540356cBB839Cbe05303d7705Fa.
How to use a crypto wallet address
To use a crypto wallet address, you first need to download a wallet (e.g., Worldcoin, MetaMask, or Coinbase Wallet) or create an account on a centralized exchange (CEX). Self-custodial crypto wallets give users access to their private keys, but exchanges only offer custodial crypto services. While you’ll still have public wallet addresses on a CEX, the CEX could seize or freeze your money at any point in time
Once you have a CEX account or a private digital wallet, you must find the cryptocurrency you want to receive. For instance, if you want to transfer Bitcoin into your Trust Wallet app, open Trust Wallet on your phone and click on the Bitcoin icon. You’ll notice an option to "Receive" BTC. When you click this icon, the wallet address associated with this cryptocurrency will appear with a linked QR code. Scan the QR code or copy the address to a clipboard. Whoever you share this address with can send Bitcoin to your Trust Wallet.
Why are wallet addresses important?
Without wallet addresses, crypto would not be safely sent across blockchain networks. Thanks to these addresses, everyone can take advantage of blockchain technology's benefits.
- Easy to share: While wallet addresses may look complicated, they’re simple to copy onto a clipboard or scan with a QR code. Also, due to the rise in NFTs (non-fungible tokens), people can use wallet name services to create short and personalized wallet addresses. Protocols such as Unstoppable Domains and Ethereum Name Service can "mint" simple-to-read wallet addresses that double as non-duplicable NFTs.
- Safe: Wallets use advanced cryptography and hashing functions to generate addresses from your public keys. People can't figure out your private keys if you send them a public wallet address. These advanced safety features significantly reduce the risk of cybercrime.
- Free to download: Although you could purchase a hardware wallet, there are dozens of free crypto wallets anyone could download as a mobile phone or desktop application. You could create as many crypto wallet addresses as possible without sharing any personal or financial information.
- New potentials for Web3 transactions: Many mobile and browser-based wallets can link to dApps (decentralized applications) on blockchains like Ethereum and Polygon. Once you link your wallet, you can securely share your wallet addresses to take advantage of DeFi (decentralized finance) services such as crypto loans or P2P trading. Wallet addresses are also essential for dApps in the NFT trading and play-to-earn gaming industries.
Public key vs. wallet address
A wallet address is an abbreviated version of your public keys. While this address corresponds to the public keys for a crypto asset in your wallet, it's not an exact copy of these keys. Wallets use an advanced hashing function to create the final wallet address on your screen. This extra layer of security helps make it even more challenging to derive private keys from any wallet address you share.
Safety tips for handling wallet addresses
One of the drawbacks of transferring crypto is that there's zero room for error. You can't call a bank to get your funds back if you make a mistake when submitting your wallet address. Also, since crypto is less regulated than other financial markets, there are many scams to watch out for. Here are a few safety tips to keep in mind before confirming a crypto transfer:
- Never share the seed phrase: The "seed phrase" is a unique set of words that signifies your wallet's private keys. Anyone with access to this seed phrase could steal all the funds in your wallet. Ideally, you should write your seed phrase on a few pieces of paper and store them in a safe place. Ignore emails or messages asking for your seed phrase, as these are often phishing scams.
- Always double-check the crypto on your public address: You can't send every cryptocurrency to the same wallet address. For instance, you’ll lose your BTC if you send Bitcoin to a Bitcoin Cash (BCH) address. Only use the wallet address associated with the coin or token you want to receive.
- Consider buying a “cold” hardware wallet: Cold wallets are hardware devices that store your private keys offline. It's far less likely a hacker will break into a cold wallet versus a software wallet. While cold wallets like Ledger and Trezor cost more upfront, they offer the best security.
- Spread crypto between wallets: Since it's free to download software wallets, you don't need to put all your crypto in one place. If you spread your crypto between multiple addresses, you’ll less likely lose all your tokens in a hack.
- Read third-party reviews before installing wallets: If you download a software wallet, double-check it has a strong reputation for security. See what others are saying about different crypto wallets and whether there were any hacks in the past.
What are Wallet Name Services?
It’s challenging to send money or even remember a 24-digit sequence of letters and numbers. Approximating a username or phone number is more likely to get mass appeal.
Wallet Name Services use NFT technology to create easily readable wallet addresses. Since NFTs are non-duplicable, no third parties can use these abbreviated wallet addresses. When you use a Wallet Name Service, it’ll transform the string of letters and numbers on a blockchain address into a short word of your choice.
Ethereum Name Service (ENS) is a popular example of a Wallet Name Service that focuses on Ethereum addresses. The Binance Smart Chain also has its Wallet Name Service called Binance Name Service (BNS). Unstoppable Domains is another site that offers access to dozens of NFT-based domain names.
Can anyone track public wallet addresses?
Besides privacy-focused coins such as Monero (XMR), anyone can view public wallet information on blockchain explorers. For instance, if you put your Ethereum wallet address on Etherscan.io, you’d see all the coins and tokens in your ETH account. However, even if everyone knew you owned a specific Ethereum wallet, nobody could access it without the seed phrase.
Wallet addresses make secure crypto transfers a reality. You can safely share your wallet addresses for Bitcoin, Ethereum, and countless other coins to receive them into your account. Remember that each wallet address works on a different blockchain, so always double-check the wallet address you're sharing links with the crypto asset you want to receive.
At Worldcoin, we aim to make sending crypto in Web3 extra secure with our Proof-of-Personhood protocol. Using advancements in eye-scanning technology, we can verify crypto wallet ownership without collecting KYC data. With our Orb device, we intend to dramatically reduce crypto scams while preserving the anonymity of Web3. Subscribe to our YouTube channel to learn more.